The wealth management industry is experiencing an ongoing trend of fee compression. As more members of the next generation enter the client pool and affluent investors increasingly accumulate wealth, financial advisors must adapt and adjust their fee structures to cater to these potential clients, according to the latest Cerulli Edge—U.S. Advisor Edition.

Currently, 44% of advisors surveyed by Cerulli derive at least 90% of their revenue from advisory fees. By 2026, that share of advisors is expected to grow to 54%, a significant increase. Meanwhile, the percentage of advisors who charge a combination of fees and commissions is expected to decrease considerably over the next 24 months.

“As fee compression continues and a new generation of potential clients emerges, advisors need to adapt and evolve to meet changing expectations,” says Kevin Lyons, senior analyst. “Expectations for service and pricing structure differ vastly from those of previous generations. Clients—particularly high-net-worth individuals—increasingly expect their advisors to provide more services beyond investment management,” he adds.

While advisors' average fees have remained largely stable, signs of change are on the horizon. By 2026, 83% of financial advisors expect to charge less than 1% for clients with more than $5 million in investable assets, and the average fee for clients with more than $10 million in assets is expected to be around 66 basis points, representing a slight decrease from current costs. That is nearly half the anticipated cost for clients with $100,000 in investable assets (125 basis points).

Cerulli finds a direct correlation between the range of services a financial advisor and their team can provide and their clients' average assets under management (AUM). For those advisors looking to attract HNW clients, offering a wider range of services while also maintaining an attractive and competitive cost structure is essential.

“The pressure to lower fees while simultaneously meeting clients' growing demand for additional services creates a challenging environment for financial advisors,” says Lyons. “Advisors who can clearly define their processes, remain flexible in their fee structures, and adapt to offer a broader range of services will be better positioned to distinguish themselves from their peers and attract the types of clients they desire,” he concludes.